Funk Salon Marketing and Business - Case Study Example

I. Executive Summary The Funk is an urban salon that will be situated along the mid part of the Park Street. The Funk is a salon that aims to providequality hair services to consumers through its experienced group of hair stylists. This paper aims to critically assess the business plan of The Funk, looking at the business idea, the context of the business, while looking at the market study and the financial study related to the business. By looking at these individual parts, the potential for sustainability, if not the profitability of the companys operation can be assessed. The business idea of putting an urban salon in the Park Street is a good idea to complement the other high-end establishments in the district. Also, the surrounding business environment in the Bristol area offers a lot of opportunities to the market. Looking at the market study of The Funk, however, the company proves to lack an in-depth study of the market from which it will determine its sales forecast, and subsequent profitability and sustainability of its business operations. Due to this, the company cannot set a clear objective for the business, then create a viable marketing strategy in order to make the business profitable and sustainable. There are also some items in the profit and loss statement that warrant much scrutiny such as drawings. The purchases may also be overestimated or underestimated because it is based on a forecast that is not backed by data to justify it. Although all in all, the profitability of The Funk cannot be truly assessed due to inadequacy of information, the weaknesses in the companys business model proves to have significant impact on the companys future sustainability of operations. These weaknesses can be relative disadvantages to the company which could undermine its profitability in the future. II. Body A. The business idea The personal grooming industry is one of the thriving industries for the current as medias influence in culture, as it puts heavy emphasis on personal appearance. The idea behind The Funk which is a trendy salon situated in the Park Street is a good one, to complement the other high-end establishments in the district. The idea also aims to cater to the younger consumers in the Park Street. The urban theme to reinforce the desired image of the brand, as well as being consistent with the other neighboring establishments is a good business idea. B. Context of the business Using the PEST analysis, we try to look at the environment of The Funk as we try to identify the various forces that may directly and indirectly impact it. After we have identified the factors that constitute PEST analysis, we classify them according to the opportunities and threat category of the SWOT framework. The political forces that are relevant to The Funk include the local legal and political government where the company operates in. This includes provision for taxes as well as regulations for businesses. The relevant economic force that may impact The Funk is the purchasing power of the surrounding population, the employment rate and the cost of living in the Bristol area. The social forces include the preferences of consumers as regards fashion, culture which can influence their perception of quality hair service. The technological consideration in The Funks business environment can also impact the company, as emerging technological breakthroughs that improve personal grooming have been included in the demands of the consumers. Because of the strength of the company in terms of its management experiences in salon operations, the company can capitalize in both the economic, social and technological trends in Park Street. The hip trends as apparent in the high-road restaurants, bars and cafe that cater to the upper-income younger population in Park Street would serve as opportunities to The Funk. Some of the threats include the better technology that consumers may demand, and maybe available to competitors. C. Critical assessment: Market study Hair salons are the service business which success depends mainly on the quality of the service that the enterprise offers. The scope of the market for hair salons is usually the geographical market that surrounds it. For The Funk salon, the scope of market study includes the surrounding market along the Park Street within the Bristol area where it chooses to position itself in terms of physical location. The first thing to be considered by the enterprise is the demand for the hair salon. In the business plan, it has been mentioned that the company has spotted various competitors in the form of other hair salons that are located along the Park Street. Knowing the level of demand for hair services is important for the company in order to match the current level of supply for hair services which is comprised of the services that its competitors in the Park Street offers. This level of demand can be derived by estimating the population around the area, the percentage of the population who may use the salons services, then the percentage of those who have the ability to pay for hair and personal grooming services, then the percentage of those who may eventually purchase the services and the average amount they are willing to spend for hair and personal grooming services within a given period. This constitutes the demand for the business. The supply for hair and personal grooming services in the Park Street will be comprised of the the sum of the services offered by the existing hair salons in the area. Knowing the supply will enable the managers of The Funk to determine the effective demand, from which they can base their sales objective. This has been one of the concerns that are raised in the business plan. The sales projection of the business plan does not incorporate any explanation from where the data has been driven. The sales projection, at least for an enterprise such as a hair salon business will be comprised by the population that will avail of the service, the average amount that they are willing to spend for a given period, as well as the frequency of availing the service. These three bases for the figures in order to determine the sales projection, which should be based on the The Funks sales objective has not been given. After the market and potential for profitability has been determined, the company should have a clear marketing objective that should be based on its vision statement. This marketing objective requires crafting marketing strategy. Since the market for The Funk is the surrounding geographical area, dividing it into many segments is not so wise. Nonetheless, The Funk should know the best way to segment the market in order to assess their growth and profitability as well as know how to target them best. As regards the business plan, the only mention about the target market is the younger population that frequents the Park Street more often. The Funks marketing strategy in the business plan talks about quality, however this does not constitute the whole strategy in order to achieve its objective. In order for it to successfully compete in the salon industry within the Park Street, The Funk has to determine how to best segment the market as previously discussed and choose a target market, as it will not be able to cater to everyone. After it has clearly defined its target market, it can mix a variety of benefits that it can offer for The Funk brand. It can constitute then its positioning as a hair salon brand. As mentioned in the business plan, The Funk can integrate its offer of quality into the essence of The Funk brand. Another point to be considered is the ambiance of the salon as its interior will greatly define its positioning. It is not enough for The Funk to just set up a very nice-looking interior with imported displays and furniture. What is essential, is to create an ambiance that will support The Funks chosen brand positioning to reinforce the brand. If the salon wants to be associated with the trait hip, then the interior look should clearly say hip. From the look, to the music, to the way the stylists and staff deal with the customers should embody the qualities of The Funk brand. It is not enough to just say that whatever suits the moods of the customers, as this is very broad and could conflict in the values of The Funk brand. Lastly, quality is an attribute which is a bit hard to measure, if The Funk management wants to compete in such terms. The Funk management must then determine the level of expectation of the customer and deliver the level of quality that is higher than the expectation in order to achieve satisfaction. While word-of-mouth can be one of the most effective tools, it is only possible when the company exceeds the expectation of the consumers. Other marketing communication functions that are cost-effective should also be employed such as sales promotion and public relations in order to ensure the fulfillment of The Funks objective. D. Critical assessment: Financial study As mentioned earlier, the lack of explanation to justify the sales forecast as well as growth is an important critical factor in the success of the business. If this is not determined well, profitability could suffer as the forecast for the subsequents costs associated with the operations may be higher than the sales figures. Another point to that attracts scrutiny is the large amount of drawing in the wages section in the profit and loss statement of The Funk. This has not been given any explanation even when the figure is higher than the wages that are paid to stylists, which are the builder of The Funks core competence being a service business. This is another weakness in the companys profit and loss statement. The amount of purchases that The Funk should have monthly will depend on the profit projections. Because the sales forecast is not accurately determined, the amount of purchase in the profit and loss statement can either be under/overestimated. This is also another weakness in the pro-forma financials of the corporation. The presence of interest expense shows that the company will utilize debt as part of its funding. While this is good in order to leverage the returns to equity investors, the fluctuations in the companys sales forecast, and later on the net income can prove to increase the perceived risk on the part of the investors. Although, debt is only a minor part of The Funks financing, so it is not a major issue. The profit and loss statement also does not show the depreciation of the equipment as well as the taxes. This is supposed to be the difference between the cash flow projections as well as the profit and loss projections. When The Funk can have loss due to the payments in taxes, it does not mean that the company is being short of cash for sustainable operations. III. Conclusion The major determinant of The Funks profitability as well as sustainability of operations is its ability to generate enough sales from the target market. Since the market for The Funk is not discussed in the business plan, it cannot be fully concluded whether The Funk will be profitable or not as a business. In the assessment, however, there are determinants which can prompt whether the company will be able to sustain its operations—management practices. For the current business plan, the lack of an identified target market being the most profitable segment is a major weakness of the plan. Without a core set of consumer The Funk aims to cater, the companys sustainability is not on a firm ground. After this, the sustainability of the business in terms of the reward system that it aims to implement in order to motivate its staff is not clear as part of the companys profit projections. Since the companys success will be dependent on the level of service that will determine the level of quality, training and development are crucial. Therefore, it should be included in the profit and loss statement of the company. Lastly, the companys cash flow shows losses during the couple of months. These are cash flows, which means that the overall profitability is much lower especially when depreciation and taxes are included in the computations. While it cannot be fully concluded that the business will succeed or not succeed due to the weaknesses in the business plan, indeed, many weaknesses which can prove to be competitive disadvantages to the company are identified which can have impacts on the companys profitability in the future. Bibliography Duncan, Tom. (2005). Principles of Advertising and IMC. 2th ed. New York: McGraw-Hill. Pickton D., & Broderick A. (2001). Integrated marketing communications. 2nd ed. United Kingdom: Pearson Education Limited. Read More